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Efficient scale of prefectural government in China

Author

Listed:
  • Fukushige Mototsugu
  • Yingxin Shi

Abstract

Background China has five layers of government including the central government. Recently, some prefectural governments meet fiscal distress. Methods We investigate the effects of urban and rural populations and area sizes on the expenditures of the prefecture-level local government by estimating quintile regression. Results At around 220,000 people, per capita local government expenditure for urban populations is minimized in our simulation. The expenditure for rural populations is proportional to the population size. The expenditure in accordance with the areas is also proportional to the area size. Conclusions The cost structure is the reason why China’s recent rapid urbanization increases prefectural government’s fiscal distress.
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Suggested Citation

  • Fukushige Mototsugu & Yingxin Shi, 2016. "Efficient scale of prefectural government in China," China Finance and Economic Review, De Gruyter, vol. 5(1), pages 88-109.
    • Handle: RePEc:bpj:cferev:v:5:y:2016:i:1:p:88-109:n:1008
    DOI: 10.1515/cfer-2016-050108
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    JEL classification:

    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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